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Which Is the Best Supply Chain Policy: Carbon Tax, or a Low-Carbon Subsidy?

Author

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  • Hanbo Wu

    (School of Economics and Management, Qingdao University of Science and Technology, Qingdao 266061, China)

  • Yaxin Sun

    (School of Economics and Management, Qingdao University of Science and Technology, Qingdao 266061, China)

  • Yutong Su

    (School of Economics and Management, Qingdao University of Science and Technology, Qingdao 266061, China)

  • Ming Chen

    (School of Economics and Management, Qingdao University of Science and Technology, Qingdao 266061, China)

  • Hongxia Zhao

    (School of Economics and Management, Qingdao University of Science and Technology, Qingdao 266061, China)

  • Qi Li

    (School of Economics and Management, Qingdao University of Science and Technology, Qingdao 266061, China)

Abstract

The low-carbon supply chain is key to promoting sustainable development and solving environmental pollution. Government policies related to lowering carbon emissions deeply affect supply chains. This paper builds a supply chain decision-making model under three different regulatory policies: a pure carbon tax, a pure low-carbon subsidy, and a mixed policy with both a carbon tax and a low-carbon subsidy, then compares and analyzes the impacts of these three different regulatory policies on carbon emissions, manufacturer and retailer income, and marginal profit in order to determine the best course of action with respect to supply chain decision-making. Our results indicate that the supply chain decision-making model under the mixed carbon tax and low-carbon subsidy policy results in a unique Nash equilibrium solution between the retailer subsidy rate and the manufacturing carbon reduction rate in a non-cooperative game. Although a carbon tax is beneficial to the ecological environment, retailer income increases slightly as the carbon tax coefficient increases before declining rapidly. Manufacturer income has a negative linear relationship with carbon tax, and an excessive amount of carbon tax increases the burden on companies. Therefore, the government must establish reasonable standards for carbon tax collection while offering moderate low-carbon subsidies at the same time as a means of optimizing social welfare.

Suggested Citation

  • Hanbo Wu & Yaxin Sun & Yutong Su & Ming Chen & Hongxia Zhao & Qi Li, 2022. "Which Is the Best Supply Chain Policy: Carbon Tax, or a Low-Carbon Subsidy?," Sustainability, MDPI, vol. 14(10), pages 1-20, May.
  • Handle: RePEc:gam:jsusta:v:14:y:2022:i:10:p:6312-:d:821171
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    References listed on IDEAS

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    Cited by:

    1. Sina Abbasi & Babek Erdebilli, 2023. "Green Closed-Loop Supply Chain Networks’ Response to Various Carbon Policies during COVID-19," Sustainability, MDPI, vol. 15(4), pages 1-30, February.
    2. Qian Zhang & Yunjia Wang & Lu Liu, 2023. "Carbon Tax or Low-Carbon Subsidy? Carbon Reduction Policy Options under CCUS Investment," Sustainability, MDPI, vol. 15(6), pages 1-26, March.
    3. Xinjia Gao & Aoshuang Zhu & Qifeng Yu, 2023. "Exploring the Carbon Abatement Strategies in Shipping Using System Dynamics Approach," Sustainability, MDPI, vol. 15(18), pages 1-25, September.

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